PACRA maintains entity ratings of Mughal

May 09, 2022 (MLN): The Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Mughal Iron & Steel Industries Ltd- PP Sukuk at ‘A+’ for the long term with a stable outlook, the company filing on PSX showed on Monday.

Mughal is a known name in the steel industry. The company’s business profile has sustained and improved, over the last few years. The company has diversity in its product slate as its operating segments comprising of ferrous &non-ferrous segments. Furthermore, the establishment of strong brands like ‘Mughal Supreme’ gives a competitive edge to the company.

The ratings incorporate the essence of material advancement that Mughal has achieved in terms of further diversity in revenue streams. The highlighted achievement through geographical diversification in the revenue stream led to a significant contribution from exports of Copper Ingots to China (i-e; ~16% of revenue contribution) which not only added to the top line but also enhanced profitability and is also expected to continue the trend, going forward. Mughal has attained a formidable market share by penetrating the retail segment.

The strategic realignment executed over the last few years by channeling 60% volumes (previous: 10% of sales mix) to the retail market has been fruitful. The Company’s revenues witnessed an increase (FY21: Rs44.9bln, FY20: Rs27.3bln) attributed to an uptick in sale volumes, positive price indicators, and reinvigorating economy. The financial risk profile incorporates healthy capitalization indicators, liquidity profile is evident from strong cash flows and improved coverages.

Consequently, the company made prominent growth in the non-ferrous segment and further decided to enhance this segment. Mughal issued a Sukuk of Rs3,000mln which will be used for meeting working capital requirements.

The ratings assigned take comfort from the debt payment account mechanism, apart from the conventional security, collateralized on the back of Sukuk.

The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, upholding of governance framework is vital.

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